Document

DEF 14A 1 def14a-proxystatementforth.htm DEF 14A Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No. )


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Check the appropriate box:
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SM Energy Company
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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2022 Proxy Statement



Notice of Annual Meeting of Stockholders May 26, 2022 Denver, Colorado

Dear Fellow SM Energy Stockholder,

On behalf of the Board of Directors, I am pleased to invite you to participate in SM Energy Company’s 2022 Annual Meeting of Stockholders. We will host the annual meeting in a virtual format that allows for expanded access, improved communications, and reduced costs to our stockholders as we minimize the impact to the environment and prioritize health and safety.

Our Commitment to Sustainable Profitability

Throughout the COVID-19 pandemic, we maintained discipline and focus in the pursuit of our key strategic objectives of optimizing cash flow, reducing leverage, and maintaining top-tier inventory. This unwavering commitment positioned us well to deliver exceptional stockholder value as the impacts of the pandemic began to wane, and was reflected in the Company’s 382% stock price growth during 2021.

Our strategic objectives are founded upon the goal of achieving sustainable profitability, which is rooted in premier operatorship of high-quality assets that deliver long-term economic drilling inventory. In 2021, we generated 22% growth in proved reserves (replacing 2021 production by 277%), recorded a standardized measure of future net cash flows of $7.0 billion, and maintained our long-term drilling inventory through successful exploration and development programs in our Midland Basin and South Texas acreage positions.

We believe that our proven success in these areas positions us well to deliver durable profitability and value to our stockholders.

We are Focused on ESG Initiatives and Disclosure of our Progress

At SM Energy, we are proud to support energy security by helping to meet global energy demand in an affordable, reliable and clean manner. We also understand the importance of participating in the effort to reduce emissions, and we embrace the fact that our future success hinges upon delivering energy in an environmentally responsible manner.

Beginning in 2020, we published ESG disclosures in the Sustainable Accounting Standards Board reporting format and through the CDP Climate Change Questionnaire. During 2021, we further demonstrated our commitment to clear and consistent ESG reporting by expanding our published disclosures to include reporting in the Task Force on Climate-related Financial Disclosures framework while continuing to disclose in the SASB and CDP frameworks. Further, we augmented our disclosures to include additional ESG metrics and added third-party verification of certain reported metrics, while enhancing the modeling of potential risks and opportunities, including application of assumptions from the IEA Sustainable Development Scenario to our long-term plan. We plan to update and expand reported metrics this year and look forward to sharing our progress with you.

Board Composition and Risk Oversight

The members of our Board of Directors are your elected representatives and we seek to advance your long-term interests. We pursue this commitment, in part, through regular Board refreshment and by maintaining a diverse and broadly inclusive membership, with five of eight director nominees gender or ethnically diverse. In 2021, we welcomed to our Board our newest member, Ms. Anita Powers. Our Board is sharply focused on oversight of the risks that are most relevant to our business, including cyber and climate-related risks, and I invite you to review the Risk Oversight section of our Corporate Governance disclosures in the accompanying Proxy Statement.

We Ask for Your Support

Our purpose is to make people’s lives better by responsibly producing energy supplies, contributing to domestic energy security and prosperity, and having a positive impact on the communities where we live and work. We value your input and the trust that you have placed in us through your continued investment in SM Energy. Your vote is important to us and we ask for your continued support as we seek to deliver sustainable profitability in a manner that places the safety and well-being of our employees and others above all, while recognizing our obligations as a good steward of the environment and the energy resources we produce.


Sincerely, William D. Sullivan Chairman of the Board

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To All Stockholders:

The 2022 Annual Meeting of Stockholders of SM Energy Company (the “Annual Meeting”) is to be conducted by live audio webcast on Thursday, May 26, 2022, at 3:30 p.m. Mountain Time. In order to attend the virtual Annual Meeting, stockholders must register at: http://www.viewproxy.com/sm-energy/2022/htype.asp.

The meeting is being convened to:

1.elect eight individuals to our Board of Directors to serve until the next annual meeting of our stockholders and until their respective successors are elected and qualified, or until their earlier resignation or removal;

2.hold an advisory vote to approve the compensation of our named executive officers;

3.ratify the appointment by our Audit Committee of Ernst & Young LLP as our independent registered public accounting firm for 2022; and

4.transact such other business that may properly come before the Annual Meeting or any adjournment(s) or postponement(s) thereof.

Our Board of Directors (the “Board”) is using this Proxy Statement to solicit proxies on our behalf for use at the Annual Meeting, and has fixed the close of business on April 1, 2022 as the record date (the “Record Date”) for determining stockholders entitled to receive notice of, to participate in, and to vote at the Annual Meeting and at any adjournment(s) or postponement(s) thereof. We are furnishing our proxy materials, including this Proxy Statement, a proxy card or voting instruction card, and our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, to the majority of our stockholders via the Internet. Accordingly, on or about April 14, 2022, a Notice of Internet Availability of Proxy Materials (the “Notice”) will be mailed by intermediaries to our stockholders as of the Record Date, containing instructions on how to access the proxy materials via the Internet or request proxy materials in printed form, and how to vote your shares.

You will be able to participate in the Annual Meeting from any location worldwide via live audio webcast, and electronically vote your shares and submit questions online. We have adopted this online format to allow us to proceed with the Annual Meeting while mitigating the health and safety risks to participants presented by COVID-19, expand access to the Annual Meeting, improve communications, and lower the cost to our stockholders, the Company and the environment. To participate in the virtual Annual Meeting, you must first register at http://www.viewproxy.com/sm-energy/2022/htype.asp by 11:59 p.m. (EDT) on May 23, 2022. You will need to enter your name, phone number, and email address, and you will then receive a meeting invitation by email containing your unique access link and password for joining the meeting. We recommend that you log in a few minutes before the Annual Meeting to ensure you are logged in when the meeting starts.

Participation in the Annual Meeting will be restricted to stockholders as of the Record Date who have registered by or before May 23, 2022, and our guests.

Your vote is important. Regardless of whether you plan to participate in the Annual Meeting, we encourage you to vote by using the internet instructions provided in the Notice or the proxy card. If the Proxy Statement and a proxy card are mailed to you, please complete, sign, date, and return the proxy card in the enclosed envelope as soon as possible. Thank you for your support for the recommendations of our Board of Directors.


IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 26, 2022. The Notice of Annual Meeting of Stockholders, the Proxy Statement for the 2022 Annual Meeting of Stockholders, and the Form 10-K for the fiscal year ended December 31, 2021, are available at http://www.viewproxy.com/sm-energy/2022

By Order of the Board of Directors,

Andrew T. Fiske

Deputy General Counsel and Corporate Secretary

Denver, Colorado

April 14, 2022

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TABLE OF CONTENTS



PROXY STATEMENT SUMMARY	iii	DIRECTOR COMPENSATION	51
		General	51
CORPORATE GOVERNANCE	7	202 1 Director Compensation	52
Overview	7
Board and Committee Independence	7	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Board Leadership Structure	7	AND MANAGEMENT	53
Corporate Responsibility, St ock holder Engagement and our		Common Stock	53
Commitment to Sustainability	8	Restricted Stock Units and Performance Share Units	53
Board and Committee Meetings	8
Committee Functions	9	REPORT OF THE AUDIT COMMITTEE	54
Risk Oversight	10	Audit Committee Pre-Approval Policy and Procedures	55
Director Nominations and Qualifications	11	202 1 Annual Report	55
Communications with our Board	13
		INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	56
PROPOSAL 1—ELECTION OF DIRECTORS	14
Director Nominee Core Competencies and Composition Highlights	15	PROPOSAL 3—RATIFICATION OF THE APPOINTMENT OF
Director Nominees	16	ERNST & YOUNG LLP AS OUR INDEPENDENT
		REGISTERED PUBLIC ACCOUNTING FIRM	57
INFORMATION ABOUT OUR EXECUTIVE OFFICERS	20
		CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	58
COMPENSATION DISCUSSION AND ANALYSIS	22	Policies and Procedures on Transactions with Related Persons	58
Section 1—Aligning Strategy with Stockholder Value Creation - Our		Transactions with Related Persons	58
Compensation Philosophy and Objectives	22	Compensation Committee Interlocks and Insider Participation	58
Section 2—Sustained Commitment to Pay for Performance - 2021
Business Highlights and Select Executive Compensation Decisions	24	VOTING, ATTENDANCE, AND OTHER MATTERS	59
Section 3—Competitive Positioning—Selection and Purpose of		Who Can Vote	59
Our Comparative Peer Group	27	Quorum	59
Section 4—Primary Elements of Compensation and Executive		How to Vote	59
Compensation Decisions	27	Differences Between Stockholders of Record and Street Name
Section 5—Compensation Determination Process	35	Holders	59
Section 6—Other Compensation Matters	37	Participating in the Virtual Annual Meeting	60
Compensation Committee Report	40	Annual Meeting Webcast	60
		Submitting Questions at the Annual Meeting	60
EXECUTIVE COMPENSATION TABLES	41	If the Virtual Annual Meeting Experiences Technical Difficulties	60
CEO Pay Ratio	41	Voting Requirements; Vote Treatment	60
Grants of Plan-Based Awards	42	Stockholders Sharing the Same Address	61
Outstanding Equity Awards	44	Revoking a Proxy	62
Stock Vested	45	Payment of Proxy Solicitation Costs	62
Pension Benefits	45	Stockholder Proposals for the 2023 Annual Meeting
Non-Qualified Deferred Compensation	46	of Stockholders	62
Potential Payments Upon Termination or Change of Control	46	Other Available Information	63
Equity Compensation Plans	48
		NON-GAAP DEFINITIONS AND RECONCILIATIONS	65
PROPOSAL 2—ADVISORY VOTE ON EXECUTIVE
COMPENSATION	49

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PROXY STATEMENT SUMMARY

This Proxy Statement Summary highlights important information presented throughout this 2022 Proxy Statement (this “Proxy Statement”) and is intended to assist you in evaluating the matters to be voted on at the Annual Meeting. This summary does not contain all of the information you should consider, and we encourage you to read this Proxy Statement in its entirety, as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “2021 Annual Report”), prior to voting.

Annual Meeting Information


DATE & TIME	PLACE	RECORD DATE	VOTING
Thursday, May 26, 2022 3:30 p.m. Mountain Time	Via the Internet Stockholders must register at http://www.viewproxy.com/sm-energy/2022/htype.asp by 11:59 p.m. (EDT) on May 23, 2022	April 1, 2022	Stockholders of record at the close of business on the Record Date may vote their shares at the Annual Meeting

Proposals and Voting Recommendations


		Voting Recommendation	Page
Proposal 1:	Election of the eight directors named in this Proxy Statement.	FOR each nominee	14
Proposal 2:	Advisory vote to approve the executive compensation of our named executive officers.	FOR	49
Proposal 3:	Ratification of the appointment by our Audit Committee of Ernst & Young LLP as our independent registered public accounting firm for 2022.	FOR	57

How to Vote Your Shares

ONLINE

CALL

MAIL

Vote online prior to or during the
Annual Meeting per the instructions
on your proxy or voting instruction card.

Vote by phone by calling the
phone number on your
proxy or voting instruction card.

If you have received a printed
version of these proxy materials,
vote by signing, dating, and
returning your proxy card by mail.

We strongly encourage you to vote. For more information about voting your shares, see “Voting, Attendance, and Other Matters” contained in this Proxy Statement.

Our 2022 Director Nominees:


DIRECTOR INDEPENDENCE	DIRECTOR TENURE	DIRECTOR DIVERSITY
Seven of eight director nominees are independent.	Our director nominees provide an effective balance of fresh perspectives and experience.	Our Board is committed to maintaining an appropriately diverse and broadly inclusive membership, with five of eight director nominees gender or ethnically diverse.


			* As of December 31, 2021; a full year of credit is given for the year in which the respective directors are appointed.			Including three female and two Hispanic nominees.

2021 Business Highlights: Executing on our Strategy

Our long-term strategy for sustainable operations included key objectives in 2021 to establish an activity level designed to optimize cash flow and reduce leverage, while maintaining top-tier inventory and demonstrating measurable environmental, social and governance (“ESG”) stewardship initiatives. We successfully executed our 2021 strategy in the following ways:

____________________________

All metrics given for the full year 2021 unless otherwise noted.

(1) Net Debt is a non-GAAP measure. Please refer to the Non-GAAP Definitions and Reconciliations section at the end of this Proxy Statement for additional information.

(2) As of December 31, 2021.

We accomplished these strategic objectives despite remote and other modified work conditions implemented at the onset of the COVID-19 Pandemic (the “Pandemic”), continuing uncertainty in global financial and commodity markets, and operational disruptions caused by unseasonably cold weather in February of 2021. Despite the challenges of the past year, we find ourselves entering 2022 well-positioned to continue executing our long-term strategy and generating value for our stockholders.

Executive Compensation Overview and Highlights: Continuing to Align Pay with Performance

The primary elements of our executive compensation program include a fixed base salary targeted at the median of our comparative peer group, an annual cash incentive opportunity linked to achievement of individual and corporate performance, and a long-term compensation opportunity generally allocated between restricted stock units (“RSUs”) vesting ratably over a three-year period and performance share units (“PSUs”) or performance-based cash awards tied to Company performance against our peer group or other established corporate goals over a three-year period. The following table depicts the components of our 2021 compensation program:

Compensation Element

Duration

Description

Purpose

FIXED

Base Salary

(cash)

Short-term

(annual)

Fixed compensation based on position, experience, and expertise; generally targeted at median of peer group.

Attract and retain qualified employees; provide a level of fixed pay based on skills, competencies, experience, and individual performance.

AT-RISK

Annual Cash Bonus

Short-term

(annual)

Annual cash incentive opportunity dependent upon individual and corporate performance in key financial, operational, and ESG-based metrics.

Drive and incentivize superior annual performance; incentivize achievement of financial, operational, and ESG-based goals aligned with the Company’s annual business plan. Aligns payout with stockholder outcomes through a modifier that increases/decreases payout based on absolute TSR.

Restricted Stock Units

Long-term

(3-year)

Time-based restricted equity that vests ratably over a three-year period.

Promotes retention and stock ownership; incentivizes long-term sustainable value creation through stock price performance.

Performance-Based Cash

Long-term

(3-year)

Performance-based cash award dependent upon achievement of goals pertaining to absolute TSR, generation of free cash flow, leverage reduction, and ESG performance.

Incentivizes long-term sustainable value creation that is aligned with our strategic plan; requires a threshold level of performance to receive any payout under the leverage reduction and free cash flow metrics. Awards became cash-based beginning in 2020 to avoid potential for excessive dilution.


Our executive compensation program is designed to align executive pay with the Company's financial, operational and ESG performance, and incentivize the creation of positive stockholder returns throughout industry cycles. Total compensation opportunities for our NEOs are weighted heavily towards variable, performance-based awards. Reduced Pay in 2019 and 2020. During a volatile commodity price environment that was exacerbated by the Pandemic and resulted in significant stock price declines throughout our industry, the Compensation Committee acted to reduce our NEOs base salaries, reduce short-term incentive plan (“STIP”) payouts, delay and reduce grants under the Company’s long term incentive plan (“LTIP”), and make cash-based LTIP awards in lieu of equity-based awards in order to avoid the potential for excessive dilution. Recovery and Return in 2021. Conversely, in 2021, the Company significantly outperformed its operational and financial targets and leveraged improved commodity prices to achieve 382 percent stock price appreciation and significant progress toward its strategic objectives. As a result, and in response to the need to recruit and retain executive talent in a competitive environment, the Company returned NEO base salaries to their pre-Pandemic levels (but without merit increases) and paid annual cash bonuses on the basis of a two times multiplier.


Corporate Governance Highlights
Our Board believes that sound corporate governance principles foster the ethical behavior and integrity owed to all of our stakeholders, and this table sets forth certain best practices we employ:
•Majority (63%) of the Board is comprised of diverse directors			•Meaningful director and executive stock ownership guidelines
•Annual elections of the entire unclassified Board			•Annual evaluations of the Board and each committee
•Independent Chairman			•Active and consistent stockholder engagement
•Director retirement policy in place and demonstrated commitment to Board refreshment			•Directors tender resignation subject to receiving majority vote of stockholders and Board acceptance
•Board committees composed entirely of independent directors			•Regular Board and committee oversight of ESG matters
•Independent directors routinely meet in executive sessions			•Regular Board and committee oversight of financial, risk management and cybersecurity matters
•Code of Business Conduct and Financial Code of Ethics regularly reviewed by the Board			•Robust director nominee selection process
•Board appropriately tenured to provide effective balance of fresh perspectives and experience			•Board and committee oversight of human capital management, including diversity, equity and inclusion

Stockholder Engagement and Responsiveness

Our Board remains committed to open engagement with our stockholders concerning our business strategy, executive compensation program, ESG initiatives, and other matters of importance. As part of this commitment, our Board and management team regularly engage with stockholders to solicit input, answer questions and ensure that our Board has the information required to understand and respond to our stockholders. During 2021, our Board and management team continued this outreach commitment by directly contacting stockholders owning more than 50 percent of the Company’s shares. For more information about our efforts to engage with and receive feedback from our stockholders, please see “Corporate Responsibility, Stockholder Engagement and our Commitment to Sustainability” contained in this Proxy Statement.

Commitment to Our Core Values: A Culture of Corporate Responsibility, Sustainability and Integrity


Our purpose is to make people’s lives better by responsibly producing energy supplies, contributing to domestic energy security and prosperity, and having a positive impact in the communities where we live and work. Our vision to sustainably create value for all of our stockholders includes near-term operational and financial goals of generating positive cash flow, while strengthening our balance sheet through absolute debt reduction and improved leverage metrics. Our culture includes approaching our business with integrity and ethical behavior, prioritizing safety, health, and environmental stewardship, promoting the success of others and the team, understanding and communicating the reasons for our actions and how every employee contributes, operating in a highly collaborative manner that is open to new ideas and technologies, supporting the development of all team members, and supporting the communities where we live and work.


As part of our commitment to positively impact the communities where we live and work, the Company encourages and supports charitable giving with its corporate match program. This chart illustrates 2021 charitable giving by employees and the corresponding corporate match. ESG and Human Capital Highlights During 2021, we prioritized ESG stewardship initiatives by: •expanding our published ESG disclosures to include reporting in the Task Force on Climate-related Financial Disclosures (“TCFD”) framework while continuing to report in the Sustainability Accounting Standards Board metrics relevant to ESG stewardship for oil and gas exploration and production companies (the “SASB Metrics”) and CDP frameworks; •augmenting our disclosures to include additional ESG metrics and adding third party verification of certain reported metrics; and •further enhancing the modeling of risks and opportunities, including applying assumptions in the IEA sustainable development scenario to our long-term plan.

Our Corporate Responsibility Report, SASB Metrics, responses to the 2021 CDP Climate Change Questionnaire (the “CDP Questionnaire”), and the TCFD are available on our website at www.sm-energy.com (information on our website is not incorporated by reference into this Proxy Statement and should not be considered part of this document).

Additionally during 2021, we achieved top quartile performance in spill metrics (compared to the trailing three-year average of reporting American Exploration Production Council (“AXPC”) members), and outperformed our internal target for greenhouse gas emission intensity. Furthermore, we completed our most recent triennial independent environmental, health and safety compliance audit in 2020, and implemented systems to track broader ESG metrics to further improve our operations and enhance reporting.

We operate only in the United States. We have established procedures and controls designed to support our objective of remaining, at all times, in material compliance with federal, state, and local laws and governmental regulations. We strive to comply with all applicable employment laws that prohibit unlawful discrimination, regulate wages and compensation, and ensure a safe workplace. On a quarterly basis, executives and other key employees are required to certify compliance with all such matters, or to report any circumstances of known or perceived non-compliance. On an annual basis, every employee is required to acknowledge understanding of, and compliance with, our Code of Business Conduct and Conflict of Interest Policy (the “Code of Business Conduct”), which sets forth the Company’s expectations regarding business conduct and ethical standards, and this process is overseen by our Audit Committee. The Company maintains an ethics and compliance hotline that allows any person to anonymously report any perceived violations of our Code of Business Conduct, ethical

standards, or other compliance-related matters, and our General Counsel directs appropriate investigations and reports to our Audit Committee and senior management concerning all such matters.

We are committed to diversity at all levels of our organization and we strive to provide equal employment opportunities to all employees and job applicants. On an annual basis, we retain an independent third party to analyze our workforce demographics and conduct discrimination and pay equity testing. No discriminatory practices have been identified and no evidence of discrimination or material pay inequity has been found. In 2021, our Board of Directors adopted a Human Rights Policy memorializing the Company’s commitment to avoid causing or contributing to adverse human rights impacts.

The following charts present certain workforce metrics as of December 31, 2021:


			Officer Gender Diversity (1)			Employee Gender Diversity


Employee Ethnic Diversity (2)

____________________________________________

(1)Includes officers at the level of Vice President and above.

(2)Ethnic diversity data is determined under guidelines set forth by the United States Equal Employment Opportunity Commission and includes employees in the following categories: American Indian or Alaska Native, Asian, Black or African American, Hispanic or Latino, or the combination of two or more races (not Hispanic or Latino).


CORPORATE GOVERNANCE

Overview

Our Board believes that sound corporate governance principles foster the ethical behavior and integrity owed to all of our stakeholders. The framework for our corporate governance principles is established by the charters for the committees of our Board, our Corporate Governance Guidelines, our Financial Code of Ethics and our Code of Business Conduct, each of which have been adopted and are regularly reviewed by our Board for appropriate modifications based on evolving corporate governance developments. A complete copy of these documents is available on our website at www.sm-energy.com or in print, free of charge, to any stockholder who requests it by contacting our Corporate Secretary (information on our website is not incorporated by reference into this Proxy Statement and should not be considered part of this document).

Our Financial Code of Ethics establishes ethical standards and principles relating to certain financial compliance and disclosure matters and applies to our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and Controller, as well as persons performing similar functions, and other officers and employees identified by our Chief Financial Officer. The Financial Code of Ethics requires that any exception or waiver thereto be made only by the Audit Committee of our Board (the “Audit Committee”) as required by law, SEC rules and regulations, and New York Stock Exchange (“NYSE”) rules, and that it be disclosed on our website at www.sm-energy.com within two business days after such exception or waiver. To date, the Audit Committee has not granted any exception or waiver of our Financial Code of Ethics.

Board and Committee Independence

With the exception of Mr. Vogel, our Chief Executive Officer (sometimes referred to herein as “CEO”), our Board is comprised entirely of independent directors who meet the SEC and NYSE independence standards, each of whom has been determined by the Board to not have any material relationship with us other than as a director and stockholder. In reviewing and making its determination, our Board considered nominee disclosures concerning past employment, remuneration, and any other relationship with us, as well as the independence tests set forth in Section 303A.02 of the Corporate Governance Standards of the NYSE’s Listed Company Manual. The Audit Committee, the Compensation Committee of our Board (the “Compensation Committee”), and the Environmental, Social, and Governance Committee of our Board (the “ESG Committee”) are each comprised solely of independent directors under the applicable requirements of the NYSE and SEC.

Board Leadership Structure

Our Corporate Governance Guidelines require our Board to annually determine whether to keep the roles of CEO and Chairman of the Board separate, or whether to permit one person to serve in both capacities. Our ESG Committee annually evaluates our leadership structure and makes a recommendation to our Board. While recognizing that different leadership structures may be appropriate at different times and under different circumstances, based on the recommendation of the ESG Committee, our Board has, since 2007, determined that it is in the best interests of our stockholders to separate the roles of CEO and Chairman of the Board.

Under this structure, the Chairman of the Board is responsible for providing leadership to the Board, facilitating communications among the directors, setting the Board meeting agenda in consultation with our CEO, presiding at meetings and executive sessions of our Board meetings, and serving as a liaison between our management and directors, while allowing our CEO to focus on leading the Company.

Our Board is not classified, and all directors are elected annually by our stockholders. A number of our independent directors have served in senior management roles with other companies in the oil and gas industry or are currently serving or have served as directors of other public companies. The specific experiences, qualifications, attributes, and skills of each independent director that enable him or her to effectively serve on his or her respective Board committees are described in each director’s biographical information. We believe that the independent and experienced directors that make up our Board, the specific experiences and skills that they

possess, and the overall leadership of the Board by the Chairman, effectively represent the interests of our stockholders and other stakeholders.

Corporate Responsibility, Stockholder Engagement and our Commitment to Sustainability

At SM Energy, we recognize that our stockholders trust us to conduct business in a responsible and ethical manner designed to protect our employees, contractors and neighbors, and the lands on which we operate, while supporting the communities where we live and work. We recognize that operating in this industry is a privilege and we take that responsibility seriously. We manage our business in a way that seeks to minimize risk to our communities and promote social, environmental, human and economic benefits, while continuously striving to be a good steward of natural resources. We believe we have earned a reputation of conducing our business in a manner that exemplifies these goals, and we work hard to preserve this reputation.

Our Board is committed to maintaining an open dialogue with our stockholders regarding our business strategy, governance practices, executive compensation program, environmental and social initiatives, response to the Pandemic, and other matters of importance. Representatives of our management team regularly engage with stockholders through conference attendance, telephone calls and one-on-one meetings. As we have executed our strategic transformation over the past several years, our Board has actively sought to align our ESG and compensation practices with our changing business and the expectations of our stockholders. Feedback we receive through conversations and proxy voting has been an important reference point for discussion and decision-making on those topics.

Throughout 2021 and into 2022, much of the feedback we received indicated the desire for additional ESG reporting. In response, we have continued to regularly update our Corporate Responsibility Report, which describes our philosophy and approach to operating our business in a manner responsive to all of our stakeholders, while seeking to create stockholder value and responsibly operate our assets to protect the environment and the health and safety of our employees and contractors. Additionally we published our SASB Metrics in order to expand our disclosures and provide enhanced descriptions of our practices related to ESG matters, and disclosed our responses to the CDP Questionnaire in order to, among other things, highlight the risks and opportunities relevant to our business for long-term sustainable operations as it relates to climate change. Furthermore, in 2020 we completed our triennial independent environmental, health and safety compliance audit, and implemented systems to track broader ESG metrics to further improve our operations and enhance reporting. Our SASB Metrics, CDP Questionnaire responses and Corporate Responsibility Report are available on our website at www.sm-energy.com. Information on our website is not incorporated by reference into this Proxy Statement and should not be considered part of this document.

All feedback is shared with and discussed by our full Board. In addition to the ESG initiatives discussed above, we have continued to modify our executive compensation program to incorporate ESG metrics and further align executive pay outcomes with the interests of our stakeholders, as well as increasing disclosure relating to our Board’s risk oversight processes. We would like to take this opportunity to thank our stockholders and other stakeholders for sharing their valuable feedback and recognizing our successful efforts to implement this feedback into our business strategy, governance practices, executive compensation programs, and sustainability focus.

Board and Committee Meetings

Our Board met nine times during 2021. Our non-management directors routinely meet in executive session immediately after regularly scheduled meetings of the Board or as otherwise deemed necessary, and met six times during 2021. No director attended less than 75 percent of meetings of the Board and meetings for the Audit, Compensation, and ESG committees upon which such director served, and the majority of our directors participated in 100 percent of our Board meetings and 100 percent of the meetings of such committees on which he or she serves. It is our policy that each director is expected to attend each annual meeting of stockholders, and each director then serving on our Board did attend the 2021 Virtual Annual Meeting of Stockholders. The following tables identify the members of each committee as of March 1, 2022, as well as the number of meetings held in 2021:

Committee Functions


AUDIT COMMITTEE
Members:						Roles and Responsibilities:
Ramiro G. Peru (Chair) Carla J. Bailo Anita M. Powers Meetings Held in 2021: 6 The Board has determined that each member of the Audit Committee is independent under the standards of independence established by SEC rules and regulations and the NYSE listing standards. The Board has determined that all members of the Audit Committee are financially literate, and that Ms. Bailo and Mr. Peru are “audit committee financial experts” as defined by the SEC.						The Audit Committee assists our Board in fulfilling its responsibilities for oversight of our financial reporting and internal control processes. Furthermore, the Audit Committee fulfills the following roles and responsibilities: •sole responsibility for the engagement and discharge of our independent registered public accounting firm; •reviews our quarterly and annual financial results; •reviews the audit plan and the results of the audit with our independent auditors; •reviews the independence of our auditors and approves the audit fees to be paid; •assesses the scope and adequacy of our system of internal accounting controls; and •reviews our financial risk management policies. The Audit Committee also has oversight responsibility for our internal audit function, Financial Risk Management Committee, cybersecurity risk and business continuity functions, and any related party transactions. Pursuant to the Audit Committee charter, members are prohibited from serving on more than three audit committees of public companies (one of which is ours), and no Audit Committee member currently serves on more than three such committees. For more information see the “Report of the Audit Committee” contained in this Proxy Statement.


COMPENSATION COMMITTEE
Members:						Roles and Responsibilities:
Stephen R. Brand (Chair) Anita M. Powers Julio M. Quintana Rose M. Robeson Meetings Held in 2021: 8 The Board has determined that each member of the Compensation Committee is independent under the standards of independence established by SEC rules and regulations and the NYSE listing standards.						The Compensation Committee’s primary function is to establish and administer our compensation policies and oversee the administration of our employee benefit plans. Furthermore, The Compensation Committee also approves and/or recommends to the Board: •the compensation arrangements for our CEO, other members of senior management and our directors; •compensation plans in which our officers and directors are eligible to participate; and •the granting of equity-based compensation or other benefits under compensation plans. The “Compensation Discussion and Analysis” section of this Proxy Statement describes these responsibilities and the manner in which they are discharged.


ENVIRONMENTAL, SOCIAL AND GOVERNANCE COMMITTEE
Members:						Roles and Responsibilities:
Julio M. Quintana (Chair) Carla J. Bailo Stephen R. Brand Rose M. Robeson Meetings Held in 2021: 8 The Board has determined that each member of the Environmental, Social and Governance Committee is independent under the Standards of Independence established by SEC rules and regulations and the NYSE listing standards.						The ESG Committee’s primary functions are to: •recommend individuals to be elected to the Board; •evaluate and plan for management succession; •review the structure and composition of all committees of the Board; •oversee all of the Company’s corporate governance functions, including the Board and committee self-evaluation process; and •oversee the development of and recommending ESG policies, programs and initiatives to the Board, including objective criteria for assessing the same. Director Nominees: In identifying and recommending potential director nominees to the Board, the ESG Committee considers such factors as character, judgment, diversity, age, expertise, industry experience, length of service, independence, and other board commitments. Our Board and the ESG Committee believes that maintaining a balanced and diverse membership contributes to stronger board dynamics and culture. Succession Planning: The ESG Committee is committed to ensuring that an effective process is in place to provide continuity of executive leadership into the future and oversees succession planning for the Company’s CEO and other executive officers. ESG Oversight: The ESG Committee is charged with overseeing, recommending to the Board and assessing the effectiveness of the Company's ESG initiatives, as well as monitoring, responding to, and making recommendations to the Board regarding ESG-related trends, emerging issues, and stockholder proposals. Board and Committee Evaluations: Under the direction of the ESG Committee, our Board and each of its committees (other than the Executive Committee) annually evaluates its performance using a written questionnaire, which is subject to annual review for changes in best practices and relevance.

Executive Committee

The Executive Committee has the authority to act on behalf of our Board when our Board is unable to meet, and it may act with respect to limited matters as to which it has been authorized to act by the Board, provided that such matters are not in conflict with our Restated Certificate of Incorporation, our Amended and Restated By-Laws (our “By-Laws”), applicable laws, regulations, or rules or the listing standards of the NYSE. The Executive Committee did not meet in 2021.

There are no arrangements or understandings between any director and any other person pursuant to which a director was or is to be elected.

Risk Oversight

While our Board oversees our risk management processes, with particular focus on the most significant risks we face, management is responsible for day-to-day risk management. Additionally, the Board has delegated oversight of certain risks to its committees with relevant subject matter expertise, as described below. We believe this division of responsibilities is the most effective approach for evaluating and addressing the risks we face, and that our current Board leadership structure, with Mr. Sullivan serving as the Chairman of our Board and Mr. Vogel serving as our CEO, supports this approach by facilitating communication between management and our Board regarding risk management processes. We also believe that this design places our Board in a better position to evaluate the performance of management, more efficiently facilitates communication of the views of the independent directors, and contributes to effective corporate governance. In 2021, during the Board’s regularly-scheduled meetings throughout the year, management provided updates on the Company’s ongoing response to the Pandemic.

We have an Enterprise Risk Management Committee (the “ERM Committee”) comprised of our CEO, Executive Vice President and Chief Financial Officer, Executive Vice President and General Counsel, Senior Vice

President—Operations, Assistant Treasurer and Senior Director—Cybersecurity, Risk & Business Continuity, and such other employees appointed from time to time by our CEO. This committee meets regularly to discuss and, as necessary, update our enterprise risk management process and plan (the “ERM Plan”), utilizing the Committee of Sponsoring Organizations of the Treadway Commission’s Enterprise Risk Management framework, and incorporating information gathered during our business strategy sessions and interviews with officers. The ERM Committee regularly considers and evaluates ESG-related risks and mitigation strategies, among others. The ERM Committee keeps minutes of its meetings and regularly reports its activities to our Board. We document risk monitoring and mitigation steps for the material risks identified based upon projected likelihood and impact of any occurrence of the particular risk. The ERM Plan is reviewed with our Board annually.

We also have a Financial Risk Management Committee (the “FRM Committee”) comprised of our CEO, Executive Vice President and Chief Financial Officer, Senior Vice President—Exploration, Development and EHS and Vice President—Marketing, and such other employees appointed from time to time by our CEO. The FRM Committee meets quarterly, and more frequently as necessary, to discuss our interest rate and commodity hedging activities and, as appropriate, to approve additional hedges or other changes to our hedging program. The FRM Committee keeps minutes of its meetings and regularly reports its activities to the Audit Committee.

The Audit Committee provides significant assistance to our Board in the oversight of our financial risk management and internal control processes. The Audit Committee reviews and discusses with management our risk assessment and risk management guidelines and policies with respect to our significant financial risk exposures, and the steps management has taken to monitor, control, mitigate, and report those exposures. These reviews and discussions include review and approval of our commodity price hedging policy, interest rate risk management, and our insurance programs, as appropriate. In addition, our internal auditors, who report directly to the Audit Committee with respect to internal audit matters, provide the Audit Committee and management with ongoing assessments of our risk management processes and activities. The Audit Committee also has oversight responsibility for the integrity of our financial statements and financial reporting processes and systems of internal controls regarding finance, accounting, and compliance with legal and regulatory requirements. The Audit Committee also receives a quarterly cybersecurity report and update from management, discusses any relevant issues related thereto, and generally oversees and contributes to our Board’s understanding of information technology and cybersecurity risks, among others that may be relevant at any given time. Upon the recommendation of the Audit Committee, the Company has taken a preventative approach with respect to cybersecurity threats by requiring training for our employees and creating various response plans to hypothetical cybersecurity attacks to quickly assess and respond to potential and actual threats.

The Compensation Committee and its compensation consultants annually review our compensation programs to ensure that they do not encourage excessive risk-taking. The ESG Committee regularly reviews and oversees the Company’s initiatives regarding ESG-related risks applicable to the Company and its stakeholders, including environmental, climate, health, safety, social and public policy matters. The Audit Committee, Compensation Committee, and ESG Committee report regularly to the Board on their respective risk management oversight activities.

Director Nominations and Qualifications

Our Corporate Governance Guidelines and the charter of the ESG Committee provide that the ESG Committee is responsible for identifying and recommending director nominees to our Board. The ESG Committee selects nominees based on a variety of factors, including the nominee’s character, judgment, diversity, age, expertise, industry experience, length of service, independence, and other board commitments. As set forth in the director qualification standards included in our Corporate Governance Guidelines and reflected in the discussion below, it is our objective that our Board collectively possess broad and relevant experience in high-level business policymaking and a commitment to represent the long-term interests of our stockholders. These standards also provide that each director should have experience in positions of responsibility and leadership, an understanding of our business environment, and a reputation for integrity. In addition, our Corporate Governance Guidelines provide that a director who retires or experiences a significant change in his or her professional or business responsibilities, including a change in his or her principal occupation, position or business affiliation, should, if requested by the ESG Committee, be prepared to offer his or her resignation from our Board. Upon tender of a resignation, the ESG Committee and our Board may review the continued appropriateness of Board membership under the circumstances. In accordance with our Corporate Governance Guidelines, each director has signed and

delivered to our Board a resignation letter that is contingent upon (a) his or her failure to receive, in accordance with our By-Laws, the affirmative vote of the holders of a majority of the shares of capital stock present in person or by proxy in an election of directors at the 2022 Annual Meeting of Stockholders; and (b) acceptance of his or her resignation by our Board in accordance with the policies and procedures adopted by our Board for such purpose.

Under the framework of our Corporate Governance Guidelines, the ESG Committee evaluates each potential nominee individually and in the context of our Board as a whole. The objective is to recommend individuals and a group that will effectively contribute to our long-term success and represent the interests of all of our stockholders and other stakeholders. In determining whether to recommend a director for reelection, the ESG Committee also considers the director’s past attendance at meetings and participation in and contributions to Board and committee activities. When seeking new director candidates, the ESG Committee routinely engages consultants and considers suggestions from incumbent directors, management, and our stockholders. The ESG Committee screens all potential candidates in the same manner regardless of the source of the recommendation.

The ESG Committee believes that our Board should reflect diversity in its broadest sense and the charter of the ESG Committee provides that, in addition to the other factors discussed above, the ESG Committee shall consider diversity in identifying individuals qualified to become Board members. In considering diversity, the ESG Committee considers our Board as a whole, without reference to specific representative directors, with the overall objective of having a group of directors that includes diverse viewpoints, that can work in a collaborative and effective manner, and that can best contribute to our long-term success. The ESG Committee believes that current Board members and director nominees reflect our commitment to diversity. Following the 2022 Annual Meeting, assuming all eight of the current nominees are elected to our Board, we will have two Hispanic directors, who have served since 2006 and 2014, respectively, and three female directors, who have served since 2014, 2018, and 2021, respectively.

In addition to the considerations discussed above, our Board understands that director tenure and refreshment are important to our stockholders and should be regularly evaluated in establishing an effective and well-functioning Board. In furtherance of this objective, our Corporate Governance Guidelines require the ESG Committee to discuss annually with any director who has reached the age of 72, his or her interest in continuing to serve as a director, and his or her contributions to our Board. With respect to each director who has reached the age of 72, following such discussion, the ESG Committee shall make a recommendation to our Board as to whether it is appropriate for such director to stand for reelection. Our Board shall determine annually, by a majority-plus-one vote, whether to nominate such person for reelection. Further, our Corporate Governance Guidelines provide that each independent director must retire in conjunction with the annual meeting of stockholders following his or her 75th birthday, unless our Board unanimously waives this requirement based on a determination that it is in the best interests of our stockholders for such person to be nominated for reelection.

In light of increased demands on public company directors and the desire for new and diverse independent director candidates in order to regularly refresh the Board as a whole, the ESG Committee understands the importance of a comprehensive director onboarding process. Under the direction of our General Counsel, with the oversight of, and in consultation with, the Chair of the ESG Committee, new directors receive wide-ranging exposure to the various aspects of our business and Company, as well as detailed overview of the Company’s policies and governance practices. New director onboarding is tailored to the specific qualifications and experience of the applicable director in order to allow him or her to meaningfully contribute to the work of our Board from the beginning of the director’s term.

The ESG Committee will consider stockholder recommendations for candidates for our Board. All stockholder recommendations must comply with the notice requirements contained in Section 4 of our By-Laws. We will furnish copies of our By-Laws without charge to any person who requests them. Requests for copies should be directed to our Corporate Secretary. For additional information about stockholder nominations, including nominations for the 2023 Annual Meeting of Stockholders, see “Stockholder Proposals for the 2023 Annual Meeting of Stockholders.” No stockholder director nominations were received in connection with the 2022 Annual Meeting.

Communications with Our Board

Our Board welcomes questions or comments about our Company. Interested parties may contact our Board as a whole, only the non-management directors, or any one or more specified individual directors, by sending a letter to the intended recipients’ attention in care of SM Energy Company, Attn: Corporate Secretary, 1775 Sherman Street, Suite 1200, Denver, CO 80203 until May 31, 2022, following which, such correspondence should be directed to 1700 Lincoln St., Suite 3200, Denver, CO 80203. All stockholder and other stakeholder communications will be provided to the named addressee or, if none named, to the Chair of the ESG Committee, who will facilitate the review of such communications. For additional information, see “Corporate Responsibility , St ake ho lder Engagement and our Commitment to Sustainability” below.


PROPOSAL 1—ELECTION OF DIRECTORS

Our Board of Directors is unclassified and directors serve one-year terms until the next annual meeting of stockholders and until their respective successors are elected and qualified, or until their earlier resignation or removal. Based on the recommendations of the ESG Committee, our Board has nominated the following individuals for election as directors at the Annual Meeting:


Carla J. Bailo			Julio M. Quintana
Stephen R. Brand			Rose M. Robeson
Ramiro G. Peru			William D. Sullivan
Anita M. Powers			Herbert S. Vogel

Each nominee is currently a director and all nominees, other than Ms. Powers who became a director upon her appointment by our Board in November, 2021, were previously elected to our Board by our stockholders. Each nominee has consented to being named as a nominee in this Proxy Statement and has indicated a willingness to serve if elected. Although our Board does not contemplate that any of the nominees will be unable to serve, if a nominee becomes unable to serve prior to the Annual Meeting, the proxy holders will vote for the election of such other person(s) as may be nominated by our Board.


☑			Our Board recommends voting “FOR” the election of each nominee listed above.

Director Nominee Core Competencies and Composition Highlights


DIRECTOR INDEPENDENCE	DIRECTOR TENURE	DIRECTOR DIVERSITY
Seven of eight director nominees are independent.	Our director nominees provide an effective balance of fresh perspectives and experience.	Our Board is committed to maintaining an appropriately diverse and broadly inclusive membership, with five of eight director nominees gender or ethnically diverse.


			* As of December 31, 2021; a full year of credit is given for the year in which the respective directors are appointed.			Including three female and two Hispanic nominees.

As discussed above, the ESG Committee utilizes the framework of our Corporate Governance Guidelines to select nominees based on their skills, achievements, and experience, and believes that each nominee should have experience in positions of responsibility and leadership. The overall objective is to identify a group of directors who can best contribute to our long-term success. All nominees discussed below are seasoned leaders who bring to our Board a vast array of oil and gas industry, public and private company, and other business experience, all at the senior executive officer level, and who meet the director qualification standards set forth in our Corporate Governance Guidelines. In addition, the nominees, whose experiences cover various aspects of the energy industry, represent diverse backgrounds, skill sets, and viewpoints, with a blend of historical and newer perspectives on our Company, and have a demonstrated ability to work collaboratively with open and candid discussion.

Set forth below for each director nominee is a summary of such director’s specific experiences, qualifications, attributes and skills, as well as biographical information, including his or her principal occupation, business experience, and public company directorships held during the last five years. There are no family relationships between any of our directors and any executive officer. Among other attributes, as a group, the nominees possess a wide breadth of skills and experience in:

•business development

•executive leadership

•operations management

•corporate governance

•finance, capital management and

•public policy

•ESG and human capital

accounting

•risk management

management matters

•the oil, gas, and natural gas liquids

•regulatory and governmental affairs

•executive compensation

exploration and production industry

•strategic planning and project management

These skills, when coupled with those highlighted below, led the ESG Committee and our Board to conclude that these individuals should continue to serve as our directors at this time in light of our business, structure, long-term strategy, and the overall energy industry environment. In addition to the foregoing, these nominees also have specific experience in certain areas we believe are particularly relevant to us in our industry at this time, as highlighted in the following table:

Bailo

Brand

Peru

Powers

Quintana

Robeson

Sullivan

Vogel

Geology & Exploration

Enterprise Risk Management and Hedging

Cybersecurity, Data Analytics and Technology

Director Nominees



			Position, Principal Occupation and Business Experience: Ms. Bailo currently serves as Chief Executive Officer of the Center for Automotive Research, a position she has held since 2017. In addition to her role at the Center for Automotive Research, Ms. Bailo has been President and Chief Executive Officer of ECOS Consulting LLC since 2014. Ms. Bailo also served as Assistant Vice President of Mobility Research and Business Development of Ohio State University from 2015 to 2017. Ms. Bailo was Senior Vice President, R&D Americas, Nissan North America, Inc. from 2011 to 2014. Prior to that appointment, she held a variety of technical and managerial positions with Nissan Motor Company Limited. Ms. Bailo started her career in 1978 at General Motors Company and held the position of Engineer, Vehicle Test, General Motors Truck & Bus until 1988. Ms. Bailo has served as a director of Advanced Auto Parts (NYSE: AAP), a leading automotive aftermarket parts provider, since August 2020 and Eve Mobility Acquisition Corp. (NYSE: EVE) since 2021. Key Attributes, Experience and Skills: Ms. Bailo brings to our Board a diverse technical and executive leadership background, including a unique perspective on the future of transportation fuels. Ms. Bailo has significant financial and risk management experience, which provides a strong foundation for her role as a member of the Audit Committee. Furthermore, as a result of her executive level experience, Ms. Bailo has extensive human resources management and corporate governance skills, in addition to the skills discussed above.
Carla J. Bailo
Director since 2018
Member, Audit and ESG Committees
Number of other public company boards: Two
Age: 61



			Position, Principal Occupation and Business Experience: Mr. Brand was a director of GeoScale, a privately held firm that provides advanced technology solutions and services to the E&P sector for solving subsurface problems in complex geologic formations, from 2014 until 2017. He was also on the Advisory Board of OmniEarth, which provides advanced analytics of earth imaging and offers a unique solution as a service platform to assess and manage data that can be used in a predictive role from 2014 until 2018. Mr. Brand was also Senior Executive Advisor of Welltec A/S, a privately held Danish corporation that develops and provides well technology and related services for the oil and gas industry. At the end of 2010, Mr. Brand retired as Senior Vice President, Technology (R&D) of ConocoPhillips (NYSE: COP), a multinational/integrated energy company. Prior to his appointment as Senior Vice President, Technology (R&D) of ConocoPhillips in October 2007, Mr. Brand served as Vice President, Exploration and Business Development at ConocoPhillips, beginning in 2005. Mr. Brand started his career in 1976 as a geologist with Phillips Petroleum Company and thereafter served in various roles of increasing responsibility with Phillips Petroleum and its successor, ConocoPhillips, including serving as President, Canada and President, Australasia. Key Attributes, Experience and Skills: Mr. Brand has over 44 years of experience in the energy industry, including extensive experience in the development of exploration and development programs, project management, and in strategic planning and research programs for upstream, downstream, and “new” stream technologies. In addition to the skills discussed above, he also has valuable human resources management skills and experiences, which provide a strong foundation for his role as Chair of the Compensation Committee and are significant in the oversight of our compensation management functions.
Stephen R. Brand
Director since 2011
Member, Compensation (Chair) and ESG Committees
Number of other public company boards: None
Age: 72



			Position, Principal Occupation and Business Experience: Mr. Peru served as Executive Vice President and Chief Financial Officer of Phelps Dodge Corporation from 2004 to 2007 (and its Senior Vice President and Chief Financial Officer from 1999-2004). He joined Phelps Dodge in 1979 and held various finance and accounting positions prior to his appointment as Chief Financial Officer. Mr. Peru currently serves on the Board of Directors of Anthem, Inc. (NYSE: ANTM) and of UNS Energy Corporation, a subsidiary of Fortis, Inc. Key Attributes, Experience and Skills: Mr. Peru brings to our Board significant financial expertise, much of which he obtained through his over 35 years of experience in the mining industry. Mr. Peru’s public company audit committee experience enhances his significant financial management and accounting oversight experience, and his board service with Anthem, Inc. and UNS Energy Corporation provide significant insights into the rapidly changing healthcare system as well as renewable energy and power generation technologies. In addition to the skills discussed above, Mr. Peru’s service on other public company boards enhances his strong corporate governance background.
Ramiro G. Peru
Director since 2014
Member, Audit Committee (Chair)
Number of other public company boards: Two
Age: 66



			Position, Principal Occupation and Business Experience: Ms. Powers currently serves on the Board of Directors of EQT Corporation (NYSE: EQT) and served on the Board of Directors of California Resources Corporation (NYSE: CRC) from 2017 to 2020. Ms. Powers served as the Executive Vice President of Worldwide Exploration for Occidental Oil and Gas Corporation and Vice President of Occidental Petroleum Corporation (NYSE: OXY), from 2007 until her retirement in 2016. Prior to her appointment as Executive Vice President, Ms. Powers served in various exploration and geological roles across the globe at Occidental beginning in 1980. Prior to her tenure at Occidental, Ms. Powers completed a one year training program at Cities Service Company. Key Attributes, Experience and Skills: Ms. Powers brings to our Board over 42 years of experience in various aspects of the oil and gas exploration and production industry, including strong experience in the Permian Basin, along with a deep understanding of geology and project management. Her executive leadership experience brings unique insights to our Compensation Committee and her financial and risk management experience provides an excellent foundation for her service on the Audit Committee.
Anita M. Powers
Director since 2021
Member, Audit and Compensation Committees
Number of other public company boards: One
Age: 66



			Position, Principal Occupation and Business Experience: Mr. Quintana currently serves on the Board of Directors of Newmont Mining Company (NYSE: NEM) and California Resources Corporation (NYSE: CRC). Additionally, Mr. Quintana previously served on the Board of Directors for Basic Energy Services (NYSE: BAS) until October, 2021. Mr. Quintana served as the President and Chief Executive Officer of Tesco Corporation (NASDAQ: TESO), from 2005 until his retirement in January 2015, and served on Tesco’s Board of Directors from September 2004 to May 2015. Prior to his appointment as President and Chief Executive Officer, Mr. Quintana served as Executive Vice President and Chief Operating Officer of Tesco beginning in September 2004. Prior to his tenure at Tesco, Mr. Quintana worked for five years in various executive roles for Schlumberger Corporation. Prior to Schlumberger, Mr. Quintana worked for nearly 20 years for Unocal Corporation, an integrated E&P company, in various operational and managerial roles. Key Attributes, Experience and Skills: Mr. Quintana brings to our Board over 41 years of experience in various aspects of the oil and gas exploration and production industry, including strong experience in upstream operations, a deep understanding of drilling and asset management technologies, and broad human resources management skills and experience, which provide a strong foundation for his role on the Compensation Committee and are important in the oversight of our financial reporting and financial and operational risk management functions. In addition to the skills discussed above, Mr. Quintana’s service on other public company boards enhances his strong corporate governance background.
Julio M. Quintana
Director since 2006
Member, ESG (Chair) and Compensation Committees
Number of other public company boards: Two
Age: 62



			Position, Principal Occupation and Business Experience: Ms. Robeson currently serves on the Board of Directors of Newpark Resources, Inc. (NYSE:NR), Antero Midstream Corporation (NYSE: AM) and The Williams Companies, Inc. (NYSE: WMB). Ms. Robeson served as Senior Vice President and Chief Financial Officer of DCP Midstream GP, LLC, the General Partner of DCP Midstream, LP (formerly DCP Midstream Partners, LP), from 2012 until her retirement in 2014. Ms. Robeson also served as Group Vice President and Chief Financial Officer of DCP Midstream LLC from 2002 to 2012. Prior to her appointment as CFO of DCP Midstream, LLC, Ms. Robeson was the Vice President and Treasurer. Prior to joining DCP Midstream, LLC, Ms. Robeson was with Kinder Morgan, Inc. (formerly KN Energy, Inc.) from 1996 to 2000 and held the position of Vice President & Treasurer. Ms. Robeson served as a director of American Midstream GP, LLC, the general partner of American Midstream Partners, LP (NYSE: AMID) from June, 2014, until her resignation in June, 2016, and served as a director of Tesco Corporation (NASDAQ: TESO) from October, 2015, until December, 2017, when Nabors Industries Ltd. completed its acquisition of Tesco. Key Attributes, Experience and Skills: Ms. Robeson brings to our Board over 35 years of broad experience in various aspects of the oil and gas industry, including exploration and production, midstream, refining, and marketing. She has executive leadership experience as well as significant financial management, risk management and accounting oversight experience. In addition to the skills discussed above, Ms. Robeson’s service on other public company boards enhances her strong corporate governance background.
Rose M. Robeson
Director since 2014
Member, Compensation, ESG and Executive Committees
Number of other public company boards: Three
Age: 61



			Position, Principal Occupation and Business Experience: Mr. Sullivan is a retired oil and gas executive who was with Anadarko Petroleum Corporation, a large independent oil and natural gas exploration and production company, for over 20 years. Mr. Sullivan retired from Anadarko in August 2003. Mr. Sullivan has been a director of SM Energy since May 2004. Mr. Sullivan currently serves as a director of Tetra Technologies, Inc. (NYSE: TTI), an oil and gas services company, a position in which he has served since 2007, including service as the non-executive Chairman of the Board since May 2015. From June 2011 to January 2021, Mr. Sullivan served as a director and member of the audit committee of CSI Compressco Partners GP, Inc., the general partner of CSI Compressco, L.P. (NASDAQ: CCLP), a publicly traded limited partnership providing wellhead compression-based production enhancement services. CSI Compressco GP, Inc. was a minority-owned subsidiary of Tetra Technologies, Inc. until January 2021. From March 2006 to September 2018, Mr. Sullivan served as a director of Legacy Reserves GP, LLC, which is the general partner of Legacy Reserves LP (NASDAQ: LGCY), a limited partnership focused on the acquisition and development of producing oil and natural gas properties. From February 2007 until May 2015, Mr. Sullivan was a director of Targa Resources GP LLC, which is the general partner of Targa Resources Partners LP (NYSE: NGLS), a midstream natural gas limited partnership engaged in the business of gathering, compressing, treating, processing, and selling natural gas, and fractionating and selling natural gas liquids (“NGLs”) and NGL products. Mr. Sullivan was with Anadarko Petroleum Corporation from 1981 to August 2003. From August 2001 to August 2003, Mr. Sullivan was Executive Vice President, Exploration and Production at Anadarko. Mr. Sullivan also served Anadarko as Vice President, Operations—International, Gulf of Mexico, and Alaska in 2001, Vice President—International Operations from 1998 to 2000, Vice President—Algeria from 1995 to 1998, and Vice President—U.S. Onshore Operations from 1993 to 1995. Key Attributes, Experience and Skills: Mr. Sullivan brings to our Board over 42 years of strong and broad experience in the oil and gas industry, with particular expertise in the exploration and production sector of the industry. His experience as an exploration and production senior executive enables him to contribute significant independent insights on our business and operations, and the economic environment and long-term strategic issues that we face. In addition to the skills discussed above, his human resources management skills and experience are important in the oversight of our compensation management functions, and his service on other public company boards of directors provides a strong corporate governance background. These skills and experiences provide a strong foundation for Mr. Sullivan’s role as Chairman of our Board.
William D. Sullivan
Director since 2004
Chairman of the Board of Directors Member, Executive Committee
Number of other public company boards: One
Age: 65



			Position, Principal Occupation and Business Experience: Mr. Vogel was appointed President and Chief Executive Officer of the Company in November 2020. Mr. Vogel previously served as the Company's President and Chief Operating Officer since July 2020, as Executive Vice President and Chief Operating Officer of the Company since May 2019, and Executive Vice President—Operations of the Company since August 2014. Mr. Vogel joined the Company in March 2012 as Senior Vice President—Portfolio Development and Technical Services, and has over 37 years of experience in the oil and gas industry. He joined the Company after his retirement from BP, where he most recently served as the President of BP Energy Co. and Regional Business Unit Leader of North American Gas & Power. His previous roles included COO-NGL, Power & Financial Products in Houston, Managing Director Gas Europe & Africa in London, and Sr. VP of the Tangguh LNG Project in Indonesia. Mr. Vogel started his career as a reservoir engineer with ARCO Alaska, Inc., and progressed through a series of positions of increasing responsibility in engineering, operations management, new ventures development, and business unit management at ARCO and BP. Key Attributes, Experience and Skills: Our Board of Directors chose Mr. Vogel to lead SM Energy as President and Chief Executive Officer and to serve on our Board because he is a proven leader with the strong technical skills and leadership vision necessary to create value for our stockholders. In addition to the skills discussed above, Mr. Vogel’s vision, experience and familiarity with our operations are critical to our success as we execute our business plan following our strategic transformation to a Company operating top tier assets.
Herbert S. Vogel
Director since 2020
Member, Executive Committee
Number of other public company boards: None
Age: 61


INFORMATION ABOUT OUR EXECUTIVE OFFICERS

The following table sets forth the names, ages (as of April 1, 2022) and positions of SM Energy’s executive officers:

Name

Age

Position

Herbert S. Vogel

President, Chief Executive Officer and Director

A. Wade Pursell

Executive Vice President and Chief Financial Officer

David W. Copeland

Executive Vice President and General Counsel

Lehman E. Newton, III

Senior Vice President—Operations

Kenneth J. Knott

Senior Vice President—Business Development and Land

Mary Ellen Lutey

Senior Vice President—Exploration, Development and EHS

David J. Whitcomb

Vice President—Marketing

Patrick A. Lytle

Vice President—Chief Accounting Officer and Controller

Herbert S. Vogel. Mr. Vogel was appointed President and Chief Executive Officer of the Company in November 2020. Mr. Vogel previously served as the Company’s President and Chief Operating Officer since July 2020, as Executive Vice President and Chief Operating Officer of the Company since May 2019, and Executive Vice President—Operations of the Company since August 2014. Mr. Vogel joined the Company in March 2012 as Senior Vice President—Portfolio Development and Technical Services, and has over 37 years of experience in the oil and gas industry. He joined the Company after his retirement from BP, where he most recently served as the President of BP Energy Co. and Regional Business Unit Leader of North American Gas & Power. His previous roles included COO—NGL, Power & Financial Products in Houston, Managing Director Gas Europe & Africa in London, and Sr. VP of the Tangguh LNG Project in Indonesia. Mr. Vogel started his career as a reservoir engineer with ARCO Alaska, Inc., and progressed through a series of positions of increasing responsibility in engineering, operations management, new ventures development, and business unit management at ARCO and BP.

A. Wade Pursell. Mr. Pursell joined the Company in September 2008 as Executive Vice President and Chief Financial Officer. Mr. Pursell was Executive Vice President and Chief Financial Officer for Helix Energy Solutions Group, Inc., a global provider of life-of-field services and development solutions to offshore energy producers and an oil and gas producer, from February 2007 to September 2008. From October 2000 to February 2007, he was Senior Vice President and Chief Financial Officer of Helix. He joined Helix in May 1997, as Vice President—Finance and Chief Accounting Officer. From 1988 through May 1997, Mr. Pursell was with Arthur Andersen LLP, serving lastly as an Experienced Manager specializing in the offshore services industry. Mr. Pursell has over 34 years of experience in the energy industry.

David W. Copeland. Mr. Copeland joined the Company in January 2011 as Senior Vice President and General Counsel. He was appointed as the Company’s Executive Vice President in May 2013. Mr. Copeland has 40 years of experience in the legal profession, including 31 years as internal counsel for various energy companies. Prior to joining the Company, he co-founded Concho Resources Inc., in Midland, Texas, where he served as an executive officer and general counsel, and later as its senior counsel through December 2010. From August 1997 through March 2004, Mr. Copeland served as an executive officer and general counsel of two energy companies he co-founded in Midland, Texas. Mr. Copeland started his career in 1982 with the Stubbeman, McRae, Sealy, Laughlin & Browder law firm in Midland, Texas.

Lehman E. Newton, III. Mr. Newton joined the Company in December 2006 as General Manager for the Midland, Texas office, was appointed Vice President and Regional Manager of the Permian region in June 2007, and was appointed Senior Vice President and Regional Manager in May 2010. In December 2019, Mr. Newton was appointed Senior Vice President—Operations of the Company. Mr. Newton has over 43 years of experience in the energy industry. Prior to joining SM Energy, Mr. Newton’s previous roles included 22 years with ARCO in various engineering, operations and management roles, including as Asset Manager, ARCO’s East Texas operations, Vice President, Business Development, ARCO Permian, and Vice President of Operations and Development, ARCO Permian; Project Manager for one of Chevron’s largest Lower 48 projects; Business

Development Manager for Pure Resources; and he was a founding partner in Westwin Energy, an independent Permian Basin exploration and production company.

Kenneth J. Knott. Mr. Knott was appointed Senior Vice President—Business Development and Land in August 2014. He was appointed Vice President—Business Development and Land and Assistant Secretary in August 2008. Mr. Knott joined SM Energy in November 2000 as Senior Landman for the Gulf Coast region in Lafayette, Louisiana, and later assumed the position of Gulf Coast Regional Land Manager when the office was moved to Houston in March 2004.

Mary Ellen Lutey. Ms. Lutey was appointed Senior Vice President—Exploration, Development and EHS in November 2020. Ms. Lutey has held various positions of increasing responsibility since first joining the Company in 2008. Most recently, she served as Senior Vice President—Development and EHS starting in December 2019. Prior to that, starting in May 2015, she was appointed Senior Vice President and Regional Manager for the South Texas and Gulf Coast business unit responsible for engineering, geoscience, operations, resource development and EHS. From December 2012 to May 2015, she served as Vice President and Regional Manager for the Company’s Mid-Continent business unit. She joined SM Energy in June 2008 as North Rockies Asset Manager. Ms. Lutey has over 30 years of technical, operating and leadership experience in the energy industry. Before joining SM Energy, Ms. Lutey worked for Chesapeake Energy and ConocoPhillips and its predecessor companies. From 1994 to 2006, she worked for Burlington Resources in numerous technical and leadership positions with responsibility in engineering, geoscience, business development, strategic planning, and resource development in the United States and Canada.

David J. Whitcomb. Mr. Whitcomb was appointed Vice President—Marketing in August 2008. Mr. Whitcomb joined SM Energy in November 1994 as Gas Contract Analyst and was named Assistant Vice President of Gas Marketing in October 1995. In March 2007, his responsibilities were expanded to include oil marketing, at which time his title was changed to Assistant Vice President and Director of Marketing.

Patrick A. Lytle. Mr. Lytle was appointed Vice President—Chief Accounting Officer and Controller in April, 2021. Since November, 2018, he served as the Company’s Controller and Principal Accounting Officer. Mr. Lytle has held roles of increasing responsibility since first joining the Company in 2007, including Senior Director, Financial Planning and Analysis and Assistant Secretary of the Company. Prior to that, he was the Director of Financial Planning and Financial Reporting. Prior to joining the Company, Mr. Lytle was an Audit Manager with Hiratsuka & Schmitt, LLP. Mr. Lytle is a certified public accountant in the State of Colorado.

No familial relationships exist between any executive officer and any director, any other executive officer, or any person nominated to become such, except that Ms. Lutey’s husband is the Company’s Vice President— Chief Information Officer. Further details regarding the compensation paid to Ms. Lutey’s husband are described under “Certain Relationships and Related Transactions.” No executive officer has been involved in any legal proceeding that occurred within the last ten years and that is material to an evaluation of their ability or integrity as an executive officer.


COMPENSATION DISCUSSION AND ANALYSIS

This compensation discussion and analysis (“CD&A”) describes the key objectives, elements and rationale for each component of the executive compensation program for our Chief Executive Officer, our Chief Financial Officer and each of our three other most highly compensated executive officers employed at the end of the 2021 fiscal year, whom we collectively refer to in this CD&A as our “NEOs” or “Named Executive Officers.”

As described in greater detail throughout this CD&A, during 2021, the Company significantly outperformed its STIP operational and financial targets, achieved the highest performance among its peer group with respect to each LTIP performance metric, and finished the year with stock price growth of 382 percent.


2021 Named Executive Officers
Herbert S. Vogel			President, Chief Executive Officer and Director
A. Wade Pursell			Executive Vice President and Chief Financial Officer
David W. Copeland			Executive Vice President and General Counsel
Mary Ellen Lutey			Senior Vice President—Exploration, Development and EHS
Lehman E. Newton, III			Senior Vice President—Operations

This CD&A is divided into the following sections:


Section 1	—	Aligning Strategy with Stockholder Value Creation—Our Compensation Philosophy and Objectives
Section 2	—	Sustained Commitment to Pay for Performance—2021 Business Highlights and Select Executive Compensation Decisions
Section 3	—	Competitive Positioning—Selection and Purpose of Our Comparative Peer Group
Section 4	—	Primary Elements of 2021 Compensation and Executive Compensation Results
Section 5	—	Compensation Determination Process
Section 6	—	Other Compensation Matters

SECTION 1—Aligning Strategy with Stockholder Value Creation—Our Compensation Philosophy and Objectives

Executive Compensation Objectives

Our executive compensation program is designed to incentivize the creation of long-term value by linking pay to a balanced mix of financial, operational, and ESG-based metrics over time. Our Compensation Committee continually evaluates and, as appropriate, modifies our program to align executive pay with Company performance and our stockholders’ experience throughout industry cycles. The objectives of our executive compensation program are to:

•link compensation to the achievement of our short-term and long-term financial and operational objectives, and returns to our stockholders;

•utilize ESG-focused metrics to prioritize sustainable and responsible deployment of capital for the long-term benefit of all stakeholders;

•align performance incentives with the long-term interests of our stockholders and ensure that our executives remain focused on Company performance;

•provide competitive total compensation opportunities that allow us to attract, retain, compensate, and motivate talented leaders;

•maintain high standards of environmental stewardship, social responsibility and corporate governance consistent with evolving best practices; and

•discourage excessive or imprudent risk-taking.

Stockholder-Focused Program Principles

The Compensation Committee strives to design our compensation programs to align executive compensation with our stockholders’ experience, including use of the following practices:

•rigorous goal setting, measurement, review and accountability;

•alignment of short-term and long-term incentive plan performance metrics with stockholder expectations;

•incorporation of total stockholder return (“TSR”) and free cash flow generation into our annual cash bonus program in order to align with our stockholders’ priorities;

•incorporation of free cash flow generation and leverage reduction metrics into our LTIP performance calculations in order to incentivize optimization of the Company’s balance sheet;

•incorporation of quantitative ESG-based metrics into our STIP and LTIP performance metrics to incentivize a focus on sustainability throughout the organization across time horizons and industry cycles; and

•heavily weight target compensation toward variable and performance-based program designs.

Compensation Best Practices and Corporate Governance Highlights

Our leadership and culture encourage long-term stockholder value creation through the implementation of best practices in compensation and corporate governance matters. We evaluate performance using both quantitative and qualitative factors and review not only “what” is achieved, but also “how” it is achieved. Our stockholder engagement efforts serve an important role in conducting this evaluation and ensuring that our executive compensation and ESG practices meet or exceed the expectations of our Board and our stockholders. Some best practices of our executive compensation program are set forth in the table below:

WHAT WE DO:

Pay-for-Performance: The significant majority of our executive pay is variable and linked to meeting our short-term and long-term financial, operational, and ESG-based goals, aligning incentives with long-term stockholder value creation.

Above Median Performance to Earn Target: Unvested performance-based equity awards that are measured on a relative basis require above-median relative performance as compared to the applicable peer group in order to earn target payout.

Target the Median: We generally target pay opportunities for our executives at the market median.

Clawback Policy: We have adopted a clawback policy applicable to our NEOs.

Performance-Weighted Compensation: A significant portion of executive compensation is in the form of performance-based awards, with 60 percent of our CEO’s 2021 target LTIP value delivered in performance-based awards.

Equity Ownership Requirements: We require executive officers and directors to maintain meaningful ownership of our stock to ensure their interests are appropriately aligned with the long-term financial interests of our stockholders.

Compensation Risk Assessment: The Compensation Committee annually reviews an analysis of our incentive compensation plans prepared by its independent compensation consultant to ensure our plans are designed appropriately and do not encourage excessive risk taking, while considering market changes and peer group comparisons.

Caps on Incentive Awards: Unvested performance-based equity awards that are measured on a relative basis are capped at target payout if absolute TSR is negative for the performance period; beginning in 2020, the annual cash bonus for executives with the title of Senior Vice President and above is also subject to a downward adjustment if absolute TSR is negative by 10 percent or more.

Proper Incentives: Our STIP includes a capital efficiency metric that incentivizes and recognizes our ongoing commitment to achieving positive returns on capital invested.

Independent Compensation Consultant: The Compensation Committee retains an independent compensation consultant.

WHAT WE DO NOT DO:

No Tax Gross-ups: We do not provide golden parachute excise tax payments or other tax gross-ups.

Prohibited Transactions: We do not permit officers, employees, or directors to enter into transactions that hedge the value of our securities owned by them, hold our securities in margin accounts, pledge our securities to secure indebtedness, or buy or sell options or derivatives with respect to our securities.

Limited Severance: We typically do not provide severance benefits in the event of termination without cause, unless it is related to a change in control.

Double-Trigger Change of Control Severance: We do not provide “single-trigger” cash severance or equity vesting acceleration upon a change in control.

No Excess Perquisites: Executive perquisites are minimal and comprise a very small portion of the executive compensation package.

No Dividends on Unvested Equity: We do not pay dividends on unvested restricted stock units or performance share units.

No Unlimited Cash Bonuses: Annual cash incentive awards are capped regardless of performance against our short-term metrics.

No Guaranteed Base Salary Increases: Base salary levels are reviewed annually and periodically adjusted based on market conditions, competitiveness, and internal considerations.

No Employment Contracts: The employment of our executives is “at will,” and there are no written employment agreements with any executive officers.

SECTION 2—Sustained Commitment to Pay for Performance—2021 Business Highlights and Select Executive Compensation Decisions

Our long-term strategy for sustainable operations included key objectives in 2021 to optimize cash flow and reduce leverage, while maintaining top-tier inventory and demonstrating measurable ESG stewardship initiatives. We successfully executed our 2021 strategy in the following ways:

____________________________

All metrics given as for the full year 2021 unless otherwise noted.

(1) Net Debt is a non-GAAP measure. Please refer to the Non-GAAP Definitions and Reconciliations section at the end of this Proxy Statement for additional information.

(2) As of December 31, 2021.

We accomplished these strategic objectives despite remote and other modified work conditions implemented at the onset of the Pandemic, continuing uncertainty in global financial and commodity markets, and operational disruptions caused by extreme cold weather in February of 2021. Despite the challenges of the past year, we find ourselves entering 2022 well-positioned to continue executing our long-term strategy and generating stockholder value. Included in the table below are select 2021 executive compensation decisions that highlight the Compensation Committee’s dedication to alignment of executive pay outcomes with Company performance and our stockholders’ experience, as well as adherence to limitations on incentive awards.


Select Executive Compensation Decisions in 2021
The Company significantly outperformed its financial and operational targets in 2021, and leveraged higher commodity prices and a favorable stock price environment to achieve stock price growth of 382 percent for the year. Accordingly, in order to align executive compensation with our stockholders' experience while remaining competitive with our peers and other companies in the recruitment and retention of executive talent, the Compensation Committee took the following actions with respect to executive compensation in 2021: •Base Salaries: Following 2020 salary reductions, returned base salaries of all executives to pre-Pandemic levels in March 2021, without application of annual merit increase. •STIP: Performance against STIP targets resulted in payout of annual cash bonus at a two times multiplier. ◦2022 STIP Design: modified plan design to include ESG-metrics as part of the quantitative, rather than qualitative, multiplier determination. •LTIP: Settled LTIP awards that vested in 2021 at a one times multiplier (target); the Company outperformed its entire peer group with respect to each performance metric (which indicated a two times multiplier); however, the terms of the LTIP design capped payout at target because absolute TSR was negative during the performance period (absolute TSR was -1.0 percent). ◦2021 LTIP Awards: restored the timing of 2021 LTIP awards to mid-year, but retained cash based award structure; continued to refine plan design based on input from our stockholders by incorporating equally-weighted TSR, free cash flow, leverage ratio reduction, and ESG-based metrics into the program.

As demonstrated throughout this CD&A, our Compensation Committee acted on the foundational principles and objectives that underlie our executive compensation program throughout the extreme volatility that impacted our industry in recent years in the following ways:

2020: reduced base salaries, LTIP grant values by 50 percent, and STIP payouts below target during depressed stock and commodity price environments that resulted from the Pandemic and associated macroeconomic events;

2021: restored pay opportunities and incentive-based awards as Company performance excelled and commodities markets and stock prices recovered; and

At all Times: incentivized long-term value creation to align executive compensation with our stockholders’ experience.

The graph below illustrates the Company’s stock price performance as compared to the average of our 2021 peer companies’ stock price performance, the price of crude oil, and the S&P 500 during the period from January 2020 through March 2022. Also shown in the chart are key compensation events, illustrating how our pay practices align with the Company’s performance.

Our Compensation Committee’s dedication to payment for performance and alignment with our stockholders’ experience is further demonstrated by the chart below, which shows that our CEO’s realized pay (as compared to target) decreased by a greater percentage than our stock price performance in a declining environment (2019 and 2020), and increased by a lesser percentage than our stock price performance in an improving environment (2021).

____________________________

(1) Stock price percentage changes reflect the difference between the closing stock price on December 31 of each of the applicable periods presented.

SECTION 3—Competitive Positioning—Selection and Purpose of Our Comparative Peer Group

Comparative Peer Group

Selection of a comparative peer group is foundational to the design of a rational executive compensation program. One of the objectives of our executive compensation program is to ensure that total compensation opportunities provided to our executive officers are competitive with the companies against which we compete for business opportunities, investment dollars, and executive talent. Our peer companies were chosen based on (i) industry, including companies in the exploration and production sector of the energy industry, (ii) organization size, with financial characteristics such as revenue, operating cash flow, market capitalization and enterprise value similar to those of the Company, and (iii) market competition, including companies that compete with us for executive talent and investors. Secondary criteria, such as peer groups identified by proxy advisory firms and companies that may differ in size and scale but directly compete with the Company for talent, and other matters deemed relevant by the Compensation Committee are also considered. The Compensation Committee’s independent compensation consultant, Frederic W. Cook & Co., Inc. (“FW Cook”) identifies peer companies that are within a specific and reasonable range of our Company with respect to the above criteria. FW Cook presents multiple peer group alternatives, and the Compensation Committee, with input from FW Cook, selects a peer group that best fits the selection criteria, excluding those companies from the peer group from the previous year that no longer satisfy the selection criteria. In April 2021, the Compensation Committee approved the peer group used for 2021 compensation comparisons, which consisted of the following companies:


2021 Peer Group
Callon Petroleum Company	Extraction Oil & Gas, Inc.	PDC Energy, Inc.
Centennial Resource Development, Inc.	Laredo Petroleum Inc.	Range Resources Corporation
Cimarex Energy Company	Magnolia Oil & Gas Corporation	Southwestern Energy Company
Denbury Resources Incorporated	Matador Resources Company	Whiting Petroleum
EQT Corporation	Oasis Petroleum, Inc.

The following chart depicts the changes to our 2021 peer group as compared to our 2020 peer group:


2020 Peers Removed from 2021 Peer Group						New 2021 Peers
Gulfport Energy Corporation(1)						EQT Corporation
Parsley Energy, Inc.(2)						Whiting Petroleum
WPX Energy Inc.(2)

(1) Removed due to bankruptcy filing.

(2) Removed due to closed or pending acquisition at the time of peer group determination.

SECTION 4—Primary Elements of 2021 Compensation and Executive Compensation Results

Compensation Element

Duration

Description

Purpose

FIXED

Base Salary

(cash)

Short-term

(annual)

Fixed compensation based on position, experience, and expertise; generally targeted at median of peer group.

Attract and retain qualified employees; provide a level of fixed pay based on skills, competencies, experience, and individual performance.

AT-RISK

Annual Cash Bonus

Short-term

(annual)

Annual cash incentive opportunity dependent upon individual and corporate performance in key financial, operational, and ESG-based metrics.

Restricted Stock Units

Long-term

(3-year)

Time-based restricted equity that vests ratably over 3-year period.

Promotes retention and stock ownership; incentivizes sustainable value creation through stock performance.

Performance-Based Cash

Long-term

(3-year)

Performance-based cash award dependent upon achievement of goals pertaining to absolute TSR, generation of free cash flow, leverage reduction, and ESG performance.

2021 Incentive Plan Results

The graphic below illustrates the relationship between our STIP and LTIP performance metrics and our incentive plan results.

HOW WE MEASURE PERFORMANCE

2021 PERFORMANCE RESULTS

PAYOUT RESULTS

2021 STIP METRICS

2021 STIP PERFORMANCE

2021 STIP PAYOUT RESULTS

QUANTITATIVE

METRIC (weighting)

RESULTS(1)

cash flow

cash flow (30%)

30%(2)

INITIAL STIP MULTIPLIER

SEC Form DEF 14A filed by SM Energy Company